“The value of lending to investors declined by more than 20 per cent over the last twelve months while lending to owner- occupiers was down by 7.7 per cent. Given such a large drop, we should expect the market to continue to cool,” said HIA Acting Principal Economist, Geordan Murray.
ABS housing finance figures for the month of August 2018 show broad weakness:
- The value of lending to investors slipped by 1.1 per cent in the month and is 20.5 per cent below the level recorded a year ago.
- The number of loans to owner-occupiers building or purchasing a new home dipped by 4.2 per cent in the month and is 13.8 per cent lower than the level a year ago.
- The number of loans to owner-occupiers purchasing established homes (excluding refinancing) was down by 2.5 per cent in the month and was 13.9 per cent lower than the level a year ago.
- First home buyer activity has been slightly more resilient with lending to this group easing back by a more moderate 0.8 per cent in the month and is down by 7.3 per cent compared with a year ago.
“Investor lending has now dropped to the lowest monthly level since mid-2013 which was the very beginning of the current housing cycle,” said Mr Murray.
“Variations in investor lending have had a significant impact on home prices throughout the cycle. The timing of APRA’s interventions in the home lending market were decisive turning points for investor lending activity and these turning points coincided with the turning points in home prices.
“At the time when APRA announced these measures both investor credit and home prices were growing rapidly and the interventions were effective in slowing both.
“Growth in lending to owner-occupiers, including first home buyers, initially filled the void as investors retreated but these borrowers are also now starting to retreat.
“The concern is that APRA’s interventions, which were effective in taking the heat out of the market at the high point of the housing cycle, now represent a risk as the market retreats,” concluded Mr Murray.